SOCIETE GENERALE March 25, 2015 - · PDF fileAcquisitions consistent with Group’s strategy: ... pricing strategy designed to ensure ... BMW X6M MICHELIN Pilot Super

1 Société Générale - Paris Non-deal Roadshow ‒ March 25, 2015

March 25, 2015

PARIS NON-DEAL ROADSHOW

SOCIETE GENERALE


● Strong free cash flow generation before acquisitions: €722m

● €118m positive impact from changes in price mix/raw materials costs, as expected

● Competitiveness plan absorbing the effects of inflation on production costs and overheads

● Volumes up by a slight 0.7%:

─ in an environment shaped by slower market growth

─ insufficiently responsive supply chain and strong pressure on Tier 2 brands

─ MICHELIN brand growing in line with markets

● Operating income before non-recurring income at €2,170m, up €81m at constant scope

of consolidation and exchange rates

● Recommended dividend of €2.50 per share*, unchanged from 2013

* Subject to approval by the Annual Shareholders Meeting of May 22, 2015

Solid results in generally sluggish markets


A business that structurally generates Free Cash Flow

► Structural free cash flow

517 599

749 717

In € millions 2011 2012 2013 2014 Total

Reported free cash flow (1) (19) 1,075 1,154 322 2,532

WCR impact of raw materials costs (2) (739) 21 405 177 (136)

Year-end volume effect on WCR (3) (200) 344 nm (172) (28)

Non-recurring items (4) 403 111 - (400) 114

Structural free cash flow (1) – (2) – (3) – (4) 517 599 749 717 2,582


Shareholder commitment and use of cash: dividend maintained, anti-dilution

measures, acquisitions

● Dividend unchanged at €2.50 per share:

─ Recommended to shareholders at the May 22, 2015 Annual Meeting

● Steady shareholder commitment:

─ Scrip dividend discontinued

─ €293m worth of share buybacks in 2013-2014

─ Share cancellations

● Acquisitions consistent with Group’s strategy:

─ Sascar acquisition (€400m)

● Employee benefit obligations:

─ Defined benefit obligation funding rate > 85% (USA, Canada, UK plans)

─ €70m in contributions paid in 2014


+4%

+1%

+3%

+5%

+2%

+4%

+1%

-2%

-1%

+3%

+0%

+1%

Passenger car/Light truck & Truck: slowdown starting from the second quarter

► Global market, 2014 / 2013 (% change YoY, in number of new tires)

Source: Michelin

Original equipment Replacement

H1 H2 2014 H1

H2 2014

H1 H2 2014 H1 H2 2014


► Passenger car/Light truck - Growth (in tonnage and number of tires, YoY change)

Passenger car/Light truck: resilient performance by the MICHELIN brand,

with an improved product mix, in a challenging market environment

Source: Michelin

MICHELIN ≥17’ MICHELIN

OE + RT

markets

2014/2013

≥17’ market

2014/2013

+3% +3% +2%

+10% +11%

Group


+1% +0%

-1%

Truck: resilient MICHELIN brand in a market boosted by strong growth in

the Intermediate and Budget segment

► Truck - Growth (in tonnage and number of tires, YoY change)

MICHELIN OE + RT

markets

2014/2013

+0,4m tires

+1,5m tires

Premium

Intermediate

& Budget

Group

Source: Michelin


-1%

-12%

+11%

-6%

+4%

+0%

Specialty tires: volumes nearly stable despite mining tire inventory drawdowns

and weaker demand for Agricultural tires

► Specialty volumes vs. markets (% change YoY)

Specialty

volumes

Mining OE &

Infrastructure*

Agricultural* * Europe and North America

** Commercial aircraft

*** Motorcycle Europe, USA, Japan

-5%

Aircraft** Two-wheel***

Source: Michelin

Weighted Specialty tire markets


Focus on the Group’s agility and competitiveness

● Customer focus:

─ 2010-2014: 50% acceleration in time-to-market, with 600 product launches in 2014

─ Reorganization of the logistics network to offer our customers greater product availability

● SG&A efficiency focus:

─ Michelin Business Solutions (MBS) in charge of leading and optimizing internal and external

Shared Services Centers (CESPs)

─ A leaner organizational structure in Europe enabling greater responsiveness

Administrative tasks centralized in a Services Center in Bucharest (200 people)

● Manufacturing efficiency focus:

─ Ramp-up of plants in Brazil, India and China, and stabilization of start-up costs

─ Product standardization PC & TB in Europe over the 2010-2014 period:

Production line-up extended by 70% while reducing number of components by 4%

─ European turnover in the size catalogue enhanced by 60% between 2010 et 2014

● Increasingly committed employees, with an engagement rate of 74% vs. 72% in 2013 (2014 Moving Forward Together Survey, IBM-Kenexa)

─ IBM-Kenexa global benchmark: 69% in 2014


Speeding up the 2012-2016 competitiveness plan: target raised to €1,200m

213 279

80 110 172

314 66

30

142

TARGETED GAINS*, 2012 – 2016

€1,000m €200m/ €300m €200m/ €300m €500m/ €600m

SG&A Materials Manufacturing –

Transport Total

2012

2013

gain

2014

gain Total

gain

2012

2013

gain

2014

gain

Total

gain

2012

2013

gain

2014

gain

Total

gain 190

275

238

2012

gain

2013

gain

2014

gain

703

* Before inflation and including avoided costs

€1,200m €600m/ €700m €300m/ €400m


2013 and 2014 industrial footprint optimization will deliver more than

€100 million in annual gains

In € millions 2013 2014 2015e 2016e 2017e Total

Non-recurring expenses (250) (84) (337)

of which cash costs (42) (46) (64) (25) 0 (177)

Cash in (asset sales) 23 23

Annual gains

beyond 2017

Productivity gains 0 54 71 110 114 114


March 25, 2015

PARIS - Société Générale

1 2014: higher operating income at constant exchange rates

2 Operating margins by reporting segment in line with objectives

3 2015: growth in line with markets


March 25, 2015


1 2014: higher operating income at

constant exchange rates


Net sales: slightly higher unit sales

►YoY change (in € millions)

2013

Net sales

2014

Net sales

20,247

19,553

+134 -449

-304

-75 Volumes

(+0.7%) Price-Mix

(-2.2%) Currency effect

(-1.5%) Change in scope

of consolidation

(-0.4%)

-3.4%


Q4: unit sales affected by weaker demand; pricing strategy designed to ensure

product competitiveness in 2015

-4.3

1.2 2

1.1

3.4

0.6

-1.2

-0.1

-2.7 -1.9

-2.4 -2.6

-1.1

-2.2 -2.2

-3.4

-1.2 -1.5

-5.3 -5.4 -4.6 -4.3

-0.6

3.8

►Q-on-Q change, 2014/2013 in %

► Volumes ► Price-Mix ► Currency effect

2013 2014

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2013 2014 2014 2013


Operating income before NR up by €81m before currency effect: effective price-

mix vs. raw materials management and good cost discipline, as expected

►YoY change (in € millions)

2013

2014

2,234 2,170

+51

Volumes

-145

Currency

effect

Other

-70 -256

Inflation

+238

Competi-

tiveness

-449

Price-mix

o/w mix:

+147

+567 -2.9%

Raw

materials

+81 excl. currency effect

+118 -18


A business that structurally generates Free Cash Flow

In € millions 2014 2013

EBITDA 3,286 3,285

Change in operating WCR 250 818

Restructuring cash costs (76) (119)

Contributions paid to pension funds (70) (185)

Taxes and interest paid (760) (586)

Other (108) (124)

Cash flow from operations 2,522 3,089

Routine capital expenditure (Maintenance, IS/IT, Dealerships) (840) (772)

Available cash flow 1,682 2,317

Growth investments (1,043) (1,208)

Sascar acquisition (400) -

Other 83 45

Free cash flow 322 1,154


27

22

26

12 12

2

9 7

Robust financial position

06/30 06/30 06/30 12/31 12/31 06/30 12/31

2011 2012 2013 2014

► Gearing – Net debt / Equity (in %)

12/31


2014 and 2013 financial highlights as reported

In € millions 2014 2013

Net sales 19,553 20,247

Operating income (before non-recurring items) 2,170 2,234

Operating margin (before non-recurring items) 11.1% 11.0%

Non-recurring items -179 - 260

Net income 1,031 1,127

Earnings per share (in €) 5.52 6.08

Capital expenditure (excluding acquisitions) 1,883 1,980

Free cash flow before Sascar acquisition* 722 1,154

Gearing 7% 2%

Employee benefit obligations 4,612 3,895

ROCE 11.1% 11.9%

Dividend per share €2.50** €2.50

*Cash flows from operating activities less cash flows used in investing activities before Sascar acquisition

**Submitted to shareholders for approval at the May 22, 2015 Annual Meeting


March 25, 2015


2 Operating margins by reporting segment

in line with objectives


● Excluding 0.4pts negative currency effect,10.9% operating margin at constant exchange rates in line

with our objectives

● MICHELIN volumes up 3%, in line with the market and up 11% in Premium to represent 42% of 2014 sales

● Strong growth in OE sales, with a record 253 technical certifications o/w 72% in the premium segment

● Many new ranges: MICHELIN-branded Premier A/S (Evergrip technology), Latitude Sport 3,

Pilot Sport Cup 2 (Premium Touch technology), Agilis R, and BFGoodrich 4x4 (KO2)

Car and Light truck tires & related distribution: operating margin in line with

objectives

► Car and Light truck tires (in € millions)

2014 2013 % change

Net sales Volume growth

10,498

+2% 10,693 -1.8%

Operating income (before non-recurring items)

1,101 1,086 +1.4%

Operating margin (before non-recurring items)

10.5% 10.2% +0.3 pts


● Excluding 1pt negative currency effect, 9.1% operating margin at constant exchange rates in line with

our objectives

● Resilient performance by the MICHELIN brand

● Record product launches featuring innovative technologies (InfinicoilTM, EnergyflexTM, RegenionTM and

CarbionTM) aligned with customers’ needs

● Successful launch of competitively priced Tier 2 brands bringing the expected performance and

profitability (Uniroyal, BFGoodrich, Kormoran, Siamtyre)

Truck tires and related distribution: operating margin in line with objectives

2014 2013 % change


6,082

-1% 6,425 -5.3%


495 503 -1.6%


8.1% 7.8% +0.3 pts

► Truck tires (in € millions)


► Specialty businesses (in € millions)

● Excluding 0.6pts negative currency effect, 19.9% operating margin at constant exchange rates in line

with our objectives

● Performance in Earthmover, Agricultural, Aircraft and Two-Wheel tires, offsetting the slowdown in

Mining (-12%) and OE Agricultural markets

Specialty businesses: continued high underlying margins

2014 2013 % change


2,973

-1% 3,129 -5%


574 645 -11%


19.3% 20.6% -1.3 pts


March 25, 2015


3 2015: growth in line with the markets


2015 outlook: continuation of last year’s market trends

* in Europe and North America

SPECIALTY MARKETS MATURE MARKETS

Europe

NEW MARKETS


Products, distribution and services matching customer needs to capture

growth opportunities

TWEEL PREMIER A/S

X MULTIWAY

X COACH

ALPIN 5

26


Sustained Introduction of Innovative Premium Tires

● 72% of 2014 OE Certifications on ≥ 17’

● Successful co-development with the most demanding vehicle manufacturers

Ferrari 488GTB MICHELIN Pilot Super Sport

Lexus RC-F MICHELIN Pilot Super Sport

BMW X6M MICHELIN Pilot Super Sport

Porsche Cayman GT4 MICHELIN Pilot Sport Cup2


MICHELIN CrossClimate : The first-ever MICHELIN summer tire with winter

certification

• MICHELIN CrossClimate is a tire with revolutionary

performances that keep you safe in every weather

condition, thanks to the successful fusion of summer and

winter technologies

• ‘A’ wet braking label in every weather condition, and

brakes 3 meters shorter than the average level of all

season market. On dry roads it brakes more than 5 meters

shorter

• 3PMSF certification for winter use


Successful fusion of Summer and Winter Technologies

INTELLIGENT NEW MIX OF

COMPOUNDS

COMBINATION OF A UNIQUE

V-SHAPED TREAD PATTERN

WITH NEW 3D SELF-LOCKING

SIPES

INNOVATIVE ASSOCIATION OF

BEVEL-EDGED TREAD BLOCKS

WITH HIGHTER-PERFORMING

SIPES


The First-ever MICHELIN Summer Tire with Winter Certification

MICHELIN Energy saver +

MICHELIN Alpin 5

GOODYEAR Vector 4seasons


2015 guidance

FY 2015

Volumes Growth in line with the markets

Impact of raw materials prices Around €450m tailwind

Competitiveness/cost inflation Neutral

Currency effect on operating income Around + €150m* o/w +€250m from EUR/USD

Operating income before non-recurring items Up beyond currency effect

ROCE More than 11%

CAPEX Between €1,700m and €1,800m

Structural free cash flow Approx. €700m

* Based on January 2015 average exchange rates


● April 22, 2015: First-quarter 2015 net sales

● May 22, 2015: Annual Shareholders Meeting

● May 26, 2015: Ex-dividend date

● May 27, 2015: Record date

● May 28, 2015: Payment date (submitted to shareholder approval at the May 22, 2015

Annual Meeting)

● July 28, 2015: First-half 2015 results

● October 22, 2015: Third-quarter 2015 net sales

2015 investor calendar


March 25, 2015


4 Appendices


Passenger Car and Light Truck Tire Market

February 2015 / 2014

Market Europe* North America Brazil China

Original equipment tires +0% -1% -17% +6%

Replacement tires -1% -2% +2% -13%

Weak Replacement Europe demand reflecting difficulties in Eastern Europe; Slight slowdown

in North America under the impact of the strong low-tier imports in 2014; China Replacement

market affected by the date of the New Year.

YTD (February 2015)

Market Europe* North America Brazil China

Original equipment tires +1% +1% -16% +11%

Replacement tires -3% -4% +1% +2%

* Russia and Turkey included


Truck Tire Market

Europe market decline led by Russia difficulties and replacement high basis for comparison ;

Drop of demand in Brazil in a weaker economic environment ; Still well oriented demand in North

America.

February 2015 / 2014

Market (Radial + Bias) Europe* North America Brazil

Original equipement tires +2% +19% -49%

Replacement tires -7% +10% -9%

YTD (February 2015)

Market (Radial + Bias) Europe* North America Brazil

Original equipment tires -2% +18% -41%

Replacement tires -11% +5% -7%

* Russia and Turkey included


Africa India

Middle East

+4% +2%

+4% +3%

GLOBAL MARKET

► % change YoY, in number of tires

-16%

South

America

+5%

+1% +3%

Europe*

Car & Light truck markets, 2014/2013

+6% +5%

North America

+4% +4%

Asia (excluding India)


Source: Michelin

* Including Russia and Turkey


+1%

-9%

Europe*

+3%

-1%

Asia (excluding India)

+1% +1%

North America

+8%

+16%

Africa India Middle East

Truck markets, 2014/2013

GLOBAL MARKET

-1%

+1%


Source: Michelin


South America

-21%

-4%

► % change YoY, in number of new tires



+3%

+0%

+5%

Q1 Q2

2014 Car and Light truck & Truck markets - Europe*


Source: Michelin


Q1 Q2

+9%

Q3

Q4

-0%

+3% +1%

-7%

Q3

Q4 Q1 Q2 Q3

-3%

-10% -10%

-15%

Q4

Q1 Q2

Q3 Q4

+11%

+2%

-3% -4%


2014 Car and Light truck & Truck markets - North America


Source: Michelin

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

+5%

+2%

+8%

+4%

+8%

+5% +4% +6%

+7%

+11%

+20%

+25%

+9%

+12%

+8%

+5%



15%

7%

3%

75%

Fleet management

BRL 237m

Cargo tracking

BRL 49m

Stolen vehicle retrieval

BRL 21m

► 2014 net sales: BRL 317m ► 2014 net sales growth: 11%

► 2014 EBITDA excl. acquisition costs:

40% of net sales ► Vehicle base: 238,000 (TB & PC) ► Employees: 942 as of December 31, 2014

2014 net sales

SASCAR acquisition, accretive for the Group

► SASCAR: an emerging market champion with leading technology

Other

BRL 10m


0

100

200

300

400

500

Raw materials in 2014

28%

25% 19%

13%

9%

6%

Natural rubber

Synthetic rubber

Textiles

Steel cord

Chemicals

Fillers

TSR20

RSS3

€/$ exchange rate:

Average FY13: 1.33

12/31/2014: 1.21

► Raw material purchases FY 2014 (€4,958m)

-9%

2012 2013 2014

0

100

200

300

400

Synthetic rubber Manufacturing BLS

2012 2013 2014 0

50

100

150

Brent

2012 2013 2014


ARS AUD BRL

CAD CNY

EUR

GBP

INR JPY MXN

PLN

RUB

THB

TRY

USD

ZAR

Other

3.8% positive currency effect in Q4

► 2014 net sales

by currency

% of net sales

ARS 1%

AUD 2%

BRL 3%

CAD 3%

CNY 5%

EUR 34%

GBP 3%

INR 1%

JPY 1%

MXN 2%

PLN 1%

RUB 1%

THB 1%

TRY 1%

USD 36%

ZAR 1%

Other 4%

Source: Thomson One

EBIT sensitivity to €/$ exchange rate:

A one cent change in the average annual

€/$ exchange rate would lead to a €15-20

million change in EBIT for the year.

EUR vs. USD

€/$ exchange rate – Dec. 31, 2011 / January 30, 2015

2012 2013 2014

1.10

1.20

1.30

1.40


Adjusted capital expenditure budgets for 2015 & 2016 to improve asset turnover

2013 2014 2015e 2016e 2017e

Capital expenditure Depreciation

1,980

1,049

1,883

1,112 1,200

1,800

1,700

1,800

1,600 1,250

1,700

1,500 1,290

► Capital expenditure and depreciation (In € millions)


A comfortable cash position

► Debt maturities at December 31, 2014 (Nominal value, in € millions)

0

500

1 000

1 500

2 000

2 500

3 000

Treasury andBack-up lines

2015 2016 2017 2018 2019 2020 2021 and more

Confirmed Back-up Facilities

Cash management Financial Assets

Cash and cash equivalents

Derivatives and leases

CP

Bond

Securitization

Loans from financial institutions


Disclaimer

"This presentation is not an offer to purchase or a solicitation to recommend the

purchase of Michelin shares. To obtain more detailed information on Michelin,

please consult the documentation published in France by Autorité des Marchés

Financiers available from the http://www.michelin.com/eng/ website.

This presentation may contain a number of forward-looking statements.

Although the Company believes that these statements are based on

reasonable assumptions at the time of the publication of this document, they

are by nature subject to risks and contingencies liable to translate into a

difference between actual data and the forecasts made or induced by these

statements."


Contacts

Valérie Magloire

Matthieu Dewavrin

+33 (0) 1 78 76 45 36

27, cours de l’île Seguin

92100 Boulogne-Billancourt - France

[email protected]

Documents

SOCIETE GENERALE March 25, 2015 - · PDF fileAcquisitions consistent with Group’s strategy: ... pricing strategy designed to ensure ... BMW X6M MICHELIN Pilot Super